Sakhalin's Role as Pivotal Asia Pacific LNG Supplier Builds

Shell's joint venture Sakhalin II project has signed a full Sales and Purchase Agreement (SPA) with Toho Gas Company Ltd - the third such Japanese sales agreement in the last week. The agreement further demonstrated Sakhalin's role as a pivotal LNG supplier for the Asia Pacific region.

Shell Gas & Power Executive Vice President Asia, Peter de Wit, said this was the eighth sales agreement to be signed between Sakhalin and a major Japanese utility. Toho Gas has decided to take an additional 0.2 million tons per annum (mtpa) for 20 years.

"Shell is proud that Russia's first LNG plant continues to provide competitive terms to customers in a growing but ever tightening market. As global LNG demand increases, Sakhalin has become an increasingly pivotal future LNG supplier to Asia and the West Coast of North America, and we look forward to continued sales success in the near future for the remaining unsold volumes from the first two trains. The deal also reinforces Japan's position as the world's largest LNG market", said de Wit.

Total sales volumes for Sakhalin II, which commences LNG deliveries to customers at the end of 2007, now stand at 7.3 mtpa, which represents over 75% of total plant capacity from the first two trains.

Sakhalin II has enjoyed a number of major marketing highlights over the past 12 months, including:

  • June 1, 2005: A Heads of Agreement for the sale and purchase of 0.42 million tons of LNG to Tohoku Electric Power Company Inc;
  • May 30, 2005: A Heads of Agreement for the long-term sales and purchase of up to 210 thousand tons of LNG per annum to Hiroshima Gas Co Ltd;
  • March, 2005: Kogas announces selection of Sakhalin II as supplier of up to two million tons per annum of LNG to Korea over 20 years;
  • October, 2004: Sakhalin II signs a supply contract with SILS for 37 million tons of LNG over 20 years for Baja California;
  • September, 2004: Tokyo Gas exercises 3.4 million tons of early options from 2008-13 (in addition to a previous 0.34 exercised in June, 04);
  • 2004: Four previous sales agreements with Japanese customers (Tokyo Gas, Tokyo Electric, Kyushu Electric, Toho Gas) signed for long-term sales commitments for a combined volume of 3.4 mtpa.

Peter de Wit concluded: "We congratulate Sakhalin Energy and our joint venture partners, Mitsui and Mitsubishi on today's agreement, we welcome this new agreement with Toho Gas, and we look forward to further building on Sakhalin's success story over the coming weeks and months."